Growth Stocks
Although growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.
And keep in mind that we focus on growth stocks, which have a good long-term history and favourable prospects. We downplay momentum stocks that tend to attract many investors simply because they are moving faster than the market averages, but are liable to fall sharply when their momentum fades.
There’s room for growth stock investing in your portfolio, but make sure you follow our TSI Network three-part Successful Investor strategy for your overall portfolio:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
Make better stock picks when you read this FREE Special Report, Canadian Growth Stocks: WestJet Stock, RioCan Stock and More.
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MCKESSON CORP. $107 (New York symbol MCK; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 232.9 million; Market cap: $24.9 billion; Price-to-sales ratio: 0.2; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www. mckesson.com) is the largest wholesale drug distributor in the U.S. and Canada. It also owns 49% of Mexico’s largest drug distributor.
McKesson’s clients include 40,000 pharmacies, as well as doctor’s offices, hospitals and clinics. It also sells surgical tools and health and beauty products.
The company continues to expand its technology solutions division, which makes computers and software that help clinics and pharmacies manage their drug inventories. This division accounts for just 3% of McKesson’s revenue but supplies 15% of its earnings.
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McKesson’s clients include 40,000 pharmacies, as well as doctor’s offices, hospitals and clinics. It also sells surgical tools and health and beauty products.
The company continues to expand its technology solutions division, which makes computers and software that help clinics and pharmacies manage their drug inventories. This division accounts for just 3% of McKesson’s revenue but supplies 15% of its earnings.
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J.P. MORGAN CHASE & CO. $49 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.8 billion; Market cap: $186.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.1%; TSINetwork Rating: Average; www.jpmorganchase.com) earned a record $6.5 billion in the three months ended March 31, 2013. That’s up 32.6% from $4.9 billion a year earlier. Earnings per share rose 33.6%, to $1.59 from $1.19, on fewer shares outstanding.
Morgan’s revenue in the quarter fell 3.6%, to $25.1 billion from $26.1 billion. The slow economy is hurting loan demand. The bank is also placing new loans at lower interest rates. However, more borrowers are repaying their loans on time: Morgan set aside $617 million to cover bad loans, down 15.0% from $726 million.
J.P. Morgan Chase is a buy....
Morgan’s revenue in the quarter fell 3.6%, to $25.1 billion from $26.1 billion. The slow economy is hurting loan demand. The bank is also placing new loans at lower interest rates. However, more borrowers are repaying their loans on time: Morgan set aside $617 million to cover bad loans, down 15.0% from $726 million.
J.P. Morgan Chase is a buy....
BROADRIDGE FINANCIAL SERVICES INC. $24 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 121.9 million; Market cap: $2.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.0%; TSINetwork Rating: Average; www.broadridge.com) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 85% of all proxy votes in the U.S.
The U.S. Patent and Trademark Office recently confirmed one of the company’s key patents, which covers how Broadridge creates and organizes data that mutual fund operators must file with the Securities and Exchange Commission. Broadridge’s unique system makes it easier for brokerage firms, insurance companies and pension plans to access this information in a timely manner. Reaffirming this patent will help Broadridge maintain its leading position in this niche market.
Broadridge is a buy.
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The U.S. Patent and Trademark Office recently confirmed one of the company’s key patents, which covers how Broadridge creates and organizes data that mutual fund operators must file with the Securities and Exchange Commission. Broadridge’s unique system makes it easier for brokerage firms, insurance companies and pension plans to access this information in a timely manner. Reaffirming this patent will help Broadridge maintain its leading position in this niche market.
Broadridge is a buy.
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FAIR ISAAC CORP. $44 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.5 million; Market cap: $1.6 billion; Price-to-sales ratio: 2.2; Dividend yield: 0.2%; TSINetwork Rating: Average; www.fico.com) makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness. The company also makes software that helps credit card issuers control fraud and analyze cardholders’spending patterns.
The company has paid an undisclosed sum for Infoglide Software Corp. This privately held firm makes programs that help businesses and government agencies detect identity theft, money laundering and other fraudulent activities. It does this by simultaneously searching a wide variety of databases for hidden relationships between people, places and things. For example, Infoglide’s technology can quickly check to see if a witness to an insurance claim has a connection to a known fraudster.
Fair Isaac is a buy.
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The company has paid an undisclosed sum for Infoglide Software Corp. This privately held firm makes programs that help businesses and government agencies detect identity theft, money laundering and other fraudulent activities. It does this by simultaneously searching a wide variety of databases for hidden relationships between people, places and things. For example, Infoglide’s technology can quickly check to see if a witness to an insurance claim has a connection to a known fraudster.
Fair Isaac is a buy.
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YUM! BRANDS INC. $69 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 450.7 million; Market cap: $31.1 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.yum.com) earned $0.70 a share in the first quarter of 2013, down 7.9% from $0.76 a year earlier. Sales fell 7.6%, to $2.5 billion from $2.7 billion.
These declines are mainly due to bad publicity over allegations that Yum’s KFC outlets in China bought raw chicken with higherthan- permitted levels of antibiotics. As a result, profits at the China division (45% of sales) fell 39.8% in the quarter. However, Chinese regulators did not charge Yum with violating safety standards.
Yum Brands is still a buy....
These declines are mainly due to bad publicity over allegations that Yum’s KFC outlets in China bought raw chicken with higherthan- permitted levels of antibiotics. As a result, profits at the China division (45% of sales) fell 39.8% in the quarter. However, Chinese regulators did not charge Yum with violating safety standards.
Yum Brands is still a buy....
IDEXX LABORATORIES INC. $84 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 54.6 million; Market cap: $4.6 billion; Priceto- sales ratio: 3.6; No dividends paid; TSINetwork Rating: Average; www.idexx.com) gets 83% of its revenue by making equipment that veterinarians use to detect diseases in pets. The remaining 17% comes from sales of systems that detect contaminants in livestock and water.
The company continues to enjoy strong demand for its new Pro-Cyte Dx hematology analyzer, which processes animal blood tests in just two minutes. That makes veterinarians less reliant on outside labs, and lowers their costs. This new model is attracting new customers and encouraging many of Idexx’s existing customers to upgrade.
In the three months ended March 31, 2013, Idexx earned $44.9 million, up 10.1% from $40.7 million a year earlier. Earnings per share rose 12.5%, to $0.81 from $0.72, on fewer shares outstanding. Revenue rose 2.9%, to $332.1 million from $322.7 million. Idexx spent 6.6% of its revenue on research in the quarter.
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The company continues to enjoy strong demand for its new Pro-Cyte Dx hematology analyzer, which processes animal blood tests in just two minutes. That makes veterinarians less reliant on outside labs, and lowers their costs. This new model is attracting new customers and encouraging many of Idexx’s existing customers to upgrade.
In the three months ended March 31, 2013, Idexx earned $44.9 million, up 10.1% from $40.7 million a year earlier. Earnings per share rose 12.5%, to $0.81 from $0.72, on fewer shares outstanding. Revenue rose 2.9%, to $332.1 million from $322.7 million. Idexx spent 6.6% of its revenue on research in the quarter.
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PETSMART INC. $67 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 102.7 million; Market cap: $6.9 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.petm.com) operates 1,269 pet stores in the U.S. and Canada. It also has 195 in-store PetsHotels, which look after pets while their owners are away.
In its 2013 fiscal year, which ended February 3, 2013, PetSmart’s earnings rose 34.2%, to $389.5 million from $290.2 million in fiscal 2012. The company spent $457 million on share buybacks during the year. Due to fewer shares outstanding, earnings per share rose 39.2%, to $3.55 from $2.55.
Sales rose 10.6%, to $6.8 billion from $6.1 billion. That’s mainly because same-store sales rose 6.3%, while sales of pet services, such as grooming and Pets- Hotel stays, increased 9.7%. Services accounted for 11.0% of PetSmart’s revenue, unchanged from the prior year. Sales also benefited from 46 new stores and four new PetsHotels.
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In its 2013 fiscal year, which ended February 3, 2013, PetSmart’s earnings rose 34.2%, to $389.5 million from $290.2 million in fiscal 2012. The company spent $457 million on share buybacks during the year. Due to fewer shares outstanding, earnings per share rose 39.2%, to $3.55 from $2.55.
Sales rose 10.6%, to $6.8 billion from $6.1 billion. That’s mainly because same-store sales rose 6.3%, while sales of pet services, such as grooming and Pets- Hotel stays, increased 9.7%. Services accounted for 11.0% of PetSmart’s revenue, unchanged from the prior year. Sales also benefited from 46 new stores and four new PetsHotels.
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THE BOEING CO. $91 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 756.2 million; Market cap: $68.8 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.boeing.com) has received approval from U.S. regulators for its redesigned battery system for the 787 Dreamliner passenger plane. Regulators grounded all 787s in January 2013 after an overheated battery forced one to make an emergency landing in Japan.
Remodelling the battery and delays in delivering new planes probably cost Boeing $600 million. That’s equal to 8% of the $7.2 billion, or $5.88 a share, it earned in 2012. However, the new battery design should make it easier for Boeing to attract new buyers for the 787.
Boeing is a buy....
Remodelling the battery and delays in delivering new planes probably cost Boeing $600 million. That’s equal to 8% of the $7.2 billion, or $5.88 a share, it earned in 2012. However, the new battery design should make it easier for Boeing to attract new buyers for the 787.
Boeing is a buy....
NEWMONT MINING CORP. $34 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 496.8 million; Market cap: $16.9 billion; Price-to-sales ratio: 1.6; Dividend yield: 5.0%; TSINetwork Rating: Average; www.newmont.com) produced 1.2 million ounces of gold in the first quarter of 2013, down 10.9% from a year earlier. That’s because colder-than-normal winter weather hurt production at its mine in Nevada. However, it still expects to produce 4.8 million to 5.1 million ounces in 2013.
Newmont remains our top gold stock. Its reserves should last decades, and most of its production is in politically stable areas. However, gold prices have fallen in the last six months and could remain under pressure, particularly if European governments sell their gold reserves to deal with their financial problems.
Newmont is now a hold....
Newmont remains our top gold stock. Its reserves should last decades, and most of its production is in politically stable areas. However, gold prices have fallen in the last six months and could remain under pressure, particularly if European governments sell their gold reserves to deal with their financial problems.
Newmont is now a hold....
HILLSHIRE BRANDS CO. $35 (New York symbol HSH; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 122.9 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.4%; TSINetwork Rating: Average; www.hillshirebrands.com) makes a variety of packaged meat products. Its main brands include Ball Park hot dogs, Jimmy Dean sausages and Hillshire Farm deli meats.
In its 2013 second quarter, which ended December 31, 2012, Hillshire’s sales rose 0.7%, to $1.06 billion from $1.05 billion a year earlier. If you disregard the contribution of a business that the company sold, sales would have risen 2.5%. Without unusual items, earnings per share rose 29.2%, to $0.62 from $0.48.
The earnings increase is partly due to savings from plant closures and layoffs. These moves should cut its costs by $100 million a year by the end of fiscal 2015.
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In its 2013 second quarter, which ended December 31, 2012, Hillshire’s sales rose 0.7%, to $1.06 billion from $1.05 billion a year earlier. If you disregard the contribution of a business that the company sold, sales would have risen 2.5%. Without unusual items, earnings per share rose 29.2%, to $0.62 from $0.48.
The earnings increase is partly due to savings from plant closures and layoffs. These moves should cut its costs by $100 million a year by the end of fiscal 2015.
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